The assessment of the probability of a risk and its consequences is referred to as what?

The assessment of the probability of a risk and its consequences is known as perception. In risk management, understanding how risks are perceived by individuals and organizations is crucial because it influences decision-making processes, including how risks are evaluated and prioritized. Perception encompasses assessing not only the likelihood of a risk occurring but also the potential impact it could have. This understanding drives the development of strategies for managing those risks effectively.

While avoidance, management, and transfer are all valid risk management strategies, they refer to actions taken to handle risks rather than the process of evaluating the risks themselves. Avoidance implies eliminating the risk entirely, management involves implementing strategies to control or mitigate risks, and transfer refers to shifting the risk to another party, such as through insurance. Therefore, the focus on assessing risk and its consequences aligns directly with the concept of perception.